The bull market is back, turning losses into profits (and discussing asset allocation)

Original | Liu Jiao Chain Overnight, BTC continued to hover around 65k. Today is the last trading day before the National Day holiday in the big A market. As soon as the market opened, it surged, rising above 3200-3300 points. The big A positions that the Chain built during the 2021-2024 three-year high-low cycle have also started to turn from loss to profit. This has initially achieved the purpose of the experiment conducted three years ago: to verify whether the "Eight-Character Formula" is suitable for the A-share market. Tomorrow is the National Day holiday. On the last day before the holiday, let's do a little summary and review. I wish all readers a happy holiday in advance. The investment journey of the Chain started in the stock market, but succeeded in the crypto market. When I was poor and had no money, it was the most difficult time. I had to work 996 to make a living, and I had no time to ponder investment matters. I was completely clueless when I heard words like "leverage" in the news. The less time I had to learn, the more difficult it was for me to get into the field; the poorer I was, the less ability I had to take risks and try. After stumbling and bumbling, I finally gained some investment insights in the crypto market, specifically in BTC, and explored some practical methods, achieving some relatively acceptable results. Starting from this breakthrough, I gradually expanded my knowledge and vision of investment. As described in "The Peach Blossom Spring", "When the forest ends and the water source is reached, there is a mountain with a small mouth, as if there is light. Then I left the boat and entered the mouth. At first it was extremely narrow, just enough for a person to pass through. After walking dozens of steps, it suddenly opened up." The "Eight-Character Formula" (stick to regular investment, increase positions on dips) is a methodology summarized from BTC. Although countless studies may say that going all-in on dips is better, once you put it into practice, you will know that the theory is too far from the actual practice of ordinary people. The Chain knows this well, because the Chain considers itself an ordinary person, an extremely ordinary person. What is an ordinary person? An ordinary person is someone who entered the big A market at 3500 points in 2021, entered BTC at $60,000, or was attracted by altcoins, meme coins, and on-chain meme coins. An ordinary person is someone who cut their losses on BTC at $16,000 in late 2022 and cut their losses on the big A at 2700 points in 2024, thereby "falling before the dawn". Therefore, the Chain often reflects on itself, warns itself that when I really want to buy, I should resist the urge, and when I really want to sell, I should also resist the urge - even increase the buying effort. Four words: resist the urge. Of course, the most important thing to go with the "Eight-Character Formula" is to resist the urge to sell. At most, if I can't resist the urge to buy, the cost will be slightly higher. So the Chain has simply set a rule: never sell at any time. This is to restrain my hands. There are often some people who think they are not ordinary, and they challenge the Chain. The implication is to compare who is better, in order to highlight the superiority of their own strategy. But in fact, there's nothing particularly brilliant about it. Everyone knows the secret to getting rich in the secondary market in two words: buy low, sell high. The secret to getting rich even faster, in eight words: add leverage, buy low, sell high. The more they boast, the less real ability they have. Those who truly have the ability to win in the zero-sum game would never want to reveal their secret techniques, so how could they be openly preaching about it? Remember: Any martial arts secret that is put up for sale is definitely fake. If they even give it away for free, it must be something that is harmful. This is also one of the major differences between blockchain thinking and Internet thinking. The Internet encourages free thinking, catering to the psychology of some people who want to get something for nothing, which is actually luring them into a trap. Blockchain advocates that from the very beginning, there is no free lunch. Not a single Bit of BTC can be obtained for free, and everyone must pay the corresponding price to get it, so they will cherish it. From this perspective, if a project that claims to be blockchain-based actually uses the free-to-play marketing method of the Internet to attract traffic through small profits, then it must have ulterior motives and plans to harvest in the future. The Chain believes that practice produces true knowledge. So, with the spirit of "If I don't go to hell, who will?", the Chain entered the "hell-level difficulty" instance - the big A market - in 2021. However, compared to friends who went all-in at high positions, the Chain was using real money in the big A market to test the effectiveness of the "Eight-Character Formula". The Chain has built two positions in the big A market: one in individual stocks and the other in stock index funds. The logic for selecting individual stocks has been discussed in the "8.26 Chain Internal Reference: Talking about the Basic Logic of Stock Market Investment". As for the stock index fund, the Chain chose the dividend index. The reason is the conclusion drawn in the 40th episode of the "History of BTC" - "The Great Depression" - that the global economy is in a Kondratieff downturn cycle, and we should not over-bet on aggressive assets, but should focus more on the defensive properties of assets. The Kondratieff cycle of the global economy sets the overall tone for our asset allocation. Indeed, in the face of the unrelenting index decline over the past three years, the fund chosen by the Chain has effectively resisted the macroeconomic recession and avoided being mired in the mud. As for individual stocks, the position-building method of the "Eight-Character Formula" has turned the stock price declines that would have resulted in being trapped into opportunities to lower the holding cost. As a result, when the macroeconomic bottom was quickly rebounded, the positions quickly turned from loss to profit. It can be seen that the right strategy can help us hedge against adverse macroeconomic conditions. Even faced with "hell-level difficulty", we can still stand undefeated. As the big A market seems to have passed the historical bottom and is showing early signs of a right-side entry signal, the Chain's stock and fund positions have all turned from loss to profit, putting us on a relatively good starting line. So far, among all the Chain's positions, only the other experiment - the altcoin UNI (-30%+) - is still mired in the mud, while the other positions are temporarily in profit, including BTC (+300%+), ETH (+4%, just turned from loss to profit), big A individual stocks (+3%, just turned from loss to profit), and big A funds (+10%+). Overall, the Chain's asset positions are in profit, which has well realized the 2020 expectation about defending against the Kondratieff downturn cycle - of course, we cannot be careless until this Kondratieff cycle is completely overcome. After all, only by surviving until the spring and laughing to the end of the world can we talk about the final victory. These asset positions, plus cash and cash equivalents such as money market funds, constitute the asset allocation (the Chain has excluded physical assets). In fact, the most important factor that determines the success or failure of an investment, but also the least emphasized and discussed, is precisely the asset allocation. Asset allocation determines the direction and magnitude of the risk exposure of the positions. The Chain's risk exposure is 90% in the crypto market (on-chain) and 10% in the non-crypto market (off-chain). Within the crypto positions, BTC accounts for over 90%, with the rest accounting for less than 10%. In the off-chain positions, the ratio of low-risk assets in the traditional sense, i.e. cash and cash equivalents, to high-risk assets in the traditional sense, i.e. stocks and stock index funds, is about 5:5. Additionally, maintaining a certain amount of low-cost long-term debt, roughly equal in scale to cash and equivalents, is intended to hedge against inflation - inflation will cause cash and debt to depreciate equally. Here's a simple pie chart to illustrate:

It is said that risk exposure, but in fact, the risk that needs to be controlled is precisely the risk. Most of the strategies of the education chain are defensive. BTC is to defend against the risk of global liquidity inflation. Cash is to defend against the risk of market volatility. Liabilities and stocks, funds are all to defend against the risk of cash depreciation. The purpose is different, so the way of asset allocation is also different. BTC position is the ballast stone. Some people think that BTC is an extremely high-risk asset, which is only because of insufficient cognition. If you fully consider all aspects of all assets, rather than just considering short-term volatility, you will realize what is the safest asset. The education chain's views and choices on these assets are based on their own needs. Different people have different views and purposes, so they cannot be simply applied. (Public account: Liu Jiaolian. Knowledge Planet: Reply "Planet" to the public account) (Disclaimer: The content of this article does not constitute any investment advice. Cryptocurrencies are extremely high-risk products with the risk of being reduced to zero at any time. Please participate cautiously and be self-responsible.)